Revival of Bombay Rayon: A unique structure
Revival of Bombay Rayon: A unique structure
Mumbai, December 16, 2020: Bombay Rayon Fashions Limited (BRFL) has its presence in a complete value chain of textiles from yarn to garments with modern facilities established with substantial investments. The market conditions affected its operations after expansion and because of liquidity crisis; dues of the lenders were restructured twice under the aegis of RBI Restructuring schemes. However, the schemes did not provide for additional working capital required for ramp up of operations and hence the manufacturing facilities were not utilized optimally. Ultimately, majority of the loans were assigned by the lenders to Asset Reconstruction Company (ARC) which facilitated the lenders exit and start of new chapter of revival.
As a part of this restructuring, BRFL is in the process of hiving-off its Tarapur Yarn Dying & Fabric Process unit (Tarapur assets) to its Subsidiary Company - BRFL Textiles Private Limited (BTPL) under a Slump-sale transaction. Post the Tarapur assets are transferred from BRFL to BTPL, a set of PE Investors would infuse equity in BTPL which would be utilized for funding the working capital for ramp up of operations of Tarapur assets. This unique structure, outside the purview of the NCLT, is beneficial to all the stakeholders of the Company and would result in maximization of value from the Tarapur assets by retaining its ‘Going Concern’ value.
This structure ensures majority of the equity in BTPL is held by BRFL and with minimal debt in BTPL; it will not be burdened with huge debt obligation and will help in expanding and catering to high margin branded business wherein BTPL can make a unique selling proposition for itself through concentrated marketing & branding exercises. With quality product delivered in short lead times at affordable rates, it will make an Indian textile manufacturing company competitive to global peers on all grounds.
The new entity will generate good revenues in excess of INR 2,000 crores annually and will be a perfect model for ‘Make in India’, offering excellent products to replace global competition in Indian as well as international market. The economic value generated out of this transaction not only makes it’s a best transaction in commercial interest of all stakeholders but also ensures non-monetary benefits as mentioned below:
a) Retention of employment of more than 5,000 employees/ workers - Livelihood of more than 5,000 direct employees and 15,000 indirect employees will be ensured. Thus, 20,000 families will have certainty about their future even during this difficult Covid-19 pandemic times. Not only this, even the past salaries & PF/ESIC dues of the workers have been cleared in full, which had a history of overdues of ~6-12 months.
b) Statutory & Government dues - The Company was not able to make the payment of statutory dues which included MIDC, MSEB and direct & indirect taxes. With this structure, all past Statutory dues pertaining to Tarapur assets are cleared in full with full certainty of regular payment going forward.
c) Securing payment of financial debt - BRFL being a majority shareholder in BTPL and the operations of BTPL ensured at optimal level by funding the working capital, will result in regular stream of cash inflows to BRFL, which would in turn be utilized towards servicing of BRFL debt which has been persistence NPA since 2013.
d) Catering into domestic & international demand - The Company has not been able to fully utilize its manufacturing capacities since last 5-6 years. The transaction would ensure that the manufacturing capacities are put to good economic use which will help in catering to ever increasing domestic and international demand of textile products.
e) Potential to foreign exchange earning - In its peak years, 60 per-cent revenue of BRFL was from export of garments to global brands like US Polo, GAP, Marks & Spencer’s etc. With this transaction, the Company will be able to exports its products and earn valuable foreign exchange for the country. With the current geo-political issues prevailing in the textile sector in particular, ample opportunity has been coming to countries like, India, Bangladesh, Srilanka, Vietnam etc. and the first mover shall be able to grab the opportunity and retain it for long term gains and benefits. Also, with many local textile manufactures being forced to shut down their operations due to implementation of national lockdown because of Covid-19 pandemic, there is huge opportunity for other textile manufactures to bridge the gap.
f) Encouragement to local brands - The Company owns the Linen Vogue, for its linen product where it can compete with global brands in the international market. This will help in making a local brand global which gels well with the Government agenda of ‘Vocal for Local’. Also an Indian brand competing on cost and quality with the global brand will go a long way in ensuring that Indian textile manufactures also have representation in the global space.
This unique structure will not only ensure clearing all the past liabilities of BRFL but augment well by creating economic value from the assets for larger national benefit and in the interest of all the stakeholders. Mr. Prashant Agrawal Managing Director further stated that, this will be a complete turnaround of BRFL group to utilise its world class facilities to the fullest immediately.